Economy of Ukraine
Ukraine gained independence in 1991 after the Soviet Union Collapsed. President Victor Yanukovych fled to Russia in February 2014, and in May 2014 Petro Poroshenko was elected to replace him. Parliamentary elections in October 2014 led to a pro-European government under Prime Minister Arseniy Yatesenyuk of the centre-right People’s Front. Russian backed militants illegally annexed the Autonomous Republic of Crimea, and pro-Russian separatists are trying to destabilize the eastern part of the country. Ukraine has received in excess of $30 billion in aid from the IMF, the World Bank, the EU, and other bilateral donors. Its Association Agreement with the EU includes Deep and Comprehensive Free Trade Area (DCFTA) accords. Dependence on steel exports and natural gas imports makes the economy vulnerable to global financial turmoil and Russian pressure.
Early figures show that Ukraine’s battered economy is slowly on the road to recovery as the fall in GDP stabilised significantly in the final quarter. The recovery remains fragile and took a turn for the worse in February 2016. Tensions in Parliament over the pace of reforms and anti-corruption measures led to the resignation of Prime Minister Arseny Yatseniuk on April 12th 2016. Deadlock has stalled billions of dollars in foreign loans and delays in forming a government have frustrated Kiev's allies, including the United States, who have warned that political infighting can threaten efforts of recovery for the war-hit economy.
For the seventh year in a row, Ukraine has registered Europe’s lowest levels of economic freedom. Ukraine was once known as "the breadbasket of Europe" but lack of investment and modernisation in agriculture has damaged productivity. Changes to law and modernisation are painfully slow but agricultural output has increased substantially and is expected continue. The Ukrainian labour market urgently requires new laws and consistent regulation that would allow it's businesses to grow. The workforce has declined due to immigration and an ageing of the population and unemployment in the third quarter of 2015 was 9.6%.
At the start of 2016, Ukraine's "deep and comprehensive" free-trade deal with the EU came into force. It was met with further economic retaliation by Russia. The emergence of serious domestic political divisions over constitutional and anti-corruption reform are threatening to further delay the disbursement of external funding from the IMF. It is likely that a snap election could take place within the coming months to resolve the current political crisis. The International Monetary Fund (IMF) downgraded its forecast for Ukraine's GDP growth in 2016 to 1.5 percent from 2 percent projected in October 2015. The projections are stipulated in the World Economic Outlook (WEO) updated every six months.
Ukraine in the Future
Analysts predict that economic growth will return in 2016 as private consumption and fixed investment begin to recover. However, ongoing fiscal consolidation as demanded by the IMF bailout will continue to limit growth prospects and the conflict in the east is still contributing to uncertainty. The Focus Economics panel sees the economy growing 1.3% in 2016. For 2017, the panel sees the country accelerating to a 2.7% expansion.
IT Sector in Ukraine
Ukraine's information technologies (IT) industry generated 2.5 billion U.S. dollars of export revenues last year, becoming one of the most profitable sectors of the Ukrainian economy. In 2015 the IT sector became the third largest industry after agricultural sector and metallurgy in terms of export revenues. In fact many people believe that the IT sector could become a locomotive of the Ukrainian economy, outpacing agriculture and metallurgy by 2025 if it keeps up the current growth.
Ukraine has firmly established itself as the leading software outsourcing destination in Eastern Europe. Ukraine is ranked third in the world with regards to literacy and almost every big city has technical university. Ukraine is now a major player in the sphere of software development services, and is one of the top IT outsourcing providers in the market.
Food for thought
Ukraine has enormous agricultural potential. Ukraine has 42.8 m ha of agricultural land which equates to 71% of the country's total area. Ideal climate conditions and rich fertile "Chernozem" soil (known as black soil) give Ukraine a unique advantage. Ukraine's unspoilt soil has led to the country emerging as one of the world's major producers of organic food. During 2014 - 2015 Ukraine, Ukraine became a world leader in many crops. Ukraine was the biggest exporter of sunflower oil, 3rd largest exporter of maize, 4th largest exporter of barley and 6th largest exporter of wheat.
Ukraine is a country with a developing tourism industry, annually visited by more than 20 million tourists (24,7 million in 2013), mainly from Eastern and Western Europe, the USA and Japan. Ukraine's tourism market has suffered significantly in the past couple of years from the ongoing conflict with Russia. However, as hostilities have subsided in Kiev and in the Western part of Ukraine, confidence is returning to the tourism industry. As such there has already been 4.34% increase in the number of tourist arrivals in 2016.
Tourism is set to play a significant role in the future economic prosperity of Ukraine.